Here are five things you must know for Wednesday, September 22:
1. -- Stock Futures Gain As Evergrande Cuts Debt Deal; Fed Meeting Up Next
Wall Street futures booked cautious early gains Wednesday ahead of a crucial Federal Reserve policy decision later in the session as global markets found support from news of a potential solution to some of China Evergrande's debt woes.
Evergrande, the indebted China-based property group on the edge of bankruptcy, said it struck a deal with creditors over a $36 million payment due on a yuan-denominated bond Thursday. The group also owes a $47.5 million payment on a separate note on the same day.
The breakthrough, alongside the passage of a bill by House lawmakers to fund the government through to December 3, while suspending the debt ceiling until the end of next year, gave stocks an early boost heading into a Wednesday session that will be dominated by the Fed decision at 2:00 PM Eastern time.
Futures contracts tied to the Dow Jones Industrial Average are indicating a 195 point opening bell gain while those linked to the S&P 500 are priced for a 23 move to the upside.
Nasdaq Composite futures are set for a more modest 55 point gain as benchmark 10-year note yields hold at 1.328%.
2. -- Fed Eyes Delta Impact On Recovery As Job Gains Slow
The Federal Reserve will wrap-up its two-day policy meeting later Wednesday with a statement at 2:00 PM Eastern time and a press conference with Chairman Jerome Powell 30 minutes later.
Analysts aren't expecting a full-throated indication of change to the Fed's myriad support levers -- either for the financial markets or the broader economy -- but instead are looking for suggestions as to when the central bank will begin slowing the pace, otherwise known as tapering, of its $120 billion in monthly bond purchases.
That aspect of the Fed's decision-making process is crucial in that it marks the first in a series of steps that will likely lead to increases in the base Fed Funds rate, which currently sits at a record low range of between 0% and 0.25%.
Recent jobs data suggests a modest leveling off in the post pandemic recovery as Delta infections remain stubbornly high, although a rebound in August retail sales, as well as stronger-than-expected housing data, could provide the Fed enough ammunition to justify a near-term tapering schedule.
3. -- House Passes Debt Ceiling Suspension, Senate Unlikely to Follow
House lawmakers pass a bill late Tuesday that would fund the government through to December 3 while simultaneously suspending the looming debt ceiling until the end of next year.
The bill, passed largely along party lines, must now find favor in the Senate if it is going to makes its way onto President Joe Biden's desk ahead of a September 30 deadline for both a functioning budget for the federal government and the debt ceiling deadline.
Republican majority leader Mitch McConnel, however, repeated his vow not to support the bill -- which needs 60 votes -- given his view that debt ceiling increases must be made only by the party in power, leaving Senate democrats relying on their slim majority in the upper chamber to move the legislation forward.
Bond markets, however, have been relatively sanguine with respect to the debt ceiling threat, which could see the U.S. fall into technical default on some of its trillions in outstanding obligations if a government shutdown, or a threadbare Treasury, prevents coupon or maturity payments.
4. -- Evergrande Cuts Deal on Bond Payment, But Other Debt Deadlines Loom
China Evergrande Group (EGRNF) said Wednesday that it had found a way, through "private negotiations", to avoid a $36 million dollar bond payment that could have triggered a damaging default for one of the world's most indebted property groups.
The move, announced by Evergrande's Hengda Real Estate Group division, made no mention of a separate $47.5 million payment due Thursday, nor other obligations -- estimated at around$850 million -- due before the end of the year, but the breakthrough agreement nonetheless soothed market concerns of a messy collapse of the China-based property behemoth.
Evergrande's potential collapse, and the spillover implications for banks, property prices, the yuan and the broader financial system in the world's second-largest economy, has kept markets on edge for much of the week.
A $90 billion liquidity injection from the People's Bank of China, amid the re-opening of stock markets following two days of Autumn holiday celebrations, also suggests Beijing remains vigilant ahead of tomorrow's debt payment deadlines.
5. -- FedEx Shares Slide As Wage Hikes, Worker Shortage Hits Profits
FedEx (FDX) - Get FedEx Corporation Report shares slumped lower Wednesday after the world's biggest package delivery group trimmed its full-year profit forecast following weaker-than-expected first quarter earnings.
FedEx said ongoing tightness in the labor market "remains the biggest issue facing our business", noting wage increases and overtime rates added $450 million in extra costs for the three months ending in August. "Overcoming staffing and retention challenges is our utmost priority," said COO Raj Subramaniam, noting plans to add around 90,000 workers over the holiday period.
Looking into its 2022 fiscal year, FedEx said it sees adjusted earnings in the region of $17.75 to $21.50, a 75 cent reduction to its prior forecast.
FedEx shares were marked 5.7% lower in pre-market trading Wednesday to indicate an opening bell price of $237.75 each, a move that would extend the stock's year-to-date decline to around 8.4%.